Retail gasoline prices are down an average 8.8 cents per gallon (CPG) in the past two weeks, to $3.222 for regular grade, according to the most recent Lundberg Survey of U.S. fuel markets. In the same period, Lundberg wholesale buying price data show a weighted average drop pf 15.7 cents.
Motorists are currently enjoying a deep discount of 39 cents versus the national regular-grade price of one year ago.
Taking a small (0.4 CPG) average gasoline tax hike into account, this translates to a retail margin improvement of 6.5 cents. As we expected, retail margin has recovered and then some from the 2.8-cent erosion suffered during the previous two weeks.
It's a different story for U.S. refiners, whose aggressive wholesale price slashing continued while crude oil price made a U-turn and rose by $3.06 per barrel in the two weeks with West Texas Intermediate (WTI) closing at $68.45 per barrel. This is the equivalent of a 7.29 CPG rise.
Oil prices rose instead of falling even though OPEC+ announced on July 6 that its August production rise, the fourth in a row to “unwind” its earlier output cuts, would be bigger—548,000 barrels per day (bpd) more versus the prior increases of 411,000 bpd.
Oil ignored that fact, knowing that the increases were not “on the ground” increases by participating nations, just paper quotas.
The oil market sees also that U.S. production is proving flat, or lower, for the year.
And oil prices also hear the speculation that the Trump administration may be about to impose more biting sanctions on Russian oil.
At the same time, world demand looks to be stronger than many had described. So globally, an oil market perception of tighter not looser supply favors stable crude oil prices. Last month's extreme oil price volatility of late June-early July has dissipated.
The U.S. gasoline market, too, may be entering comparative price stability. Total U.S. refining capacity utilization is unchanged at 94.7%. Although supply is more than sufficient for our not very robust demand, pressure on refiners to recoup gasoline margin losses is building. Meanwhile, retailers are momentarily sitting rather pretty at nearly 36 CPG and some may see margin erode a bit.
Around the country with the exception of the West, rack prices have been jumping especially in Midwest and Gulf markets. But late last week, wholesale prices rises were waning or dropping in many markets.
Click here for previous Lundberg Survey reports in CSP Daily News.
Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, California.
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